Abstract

Environmental impacts of energy are a great source of market distortion since they impose costs on society which are not taken into account in energy decisions. Recently, significant progress is made in the development of methodologies capable of attributing costs to various types of environmental damages. However, the reliability of the resulting external cost values is strongly disputed because these values are still associated with a high degree of uncertainty. This paper uses the theory of fuzzy sets in order to effectively incorporate uncertainties in the assessment of externalities and to facilitate their exploitation in decision making. The developed approach is applied to a set of electricity generation technologies which are comparatively evaluated on the basis of their social cost defined as the sum of private and external costs.

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